Lula and Chávez Economic Summit

The presidents of Brazil and Venezuela, Luis Inácio Lula da Silva and Hugo Chávez together in 2008, photo by Marcello Casal Jr./ABr.

RIO DE JANEIRO – The presidents of Brazil and Venezuela, Luis Inácio Lula da Silva and Hugo Chávez, met last week in Salvador, capital city of Bahia, to discuss bilateral energy projects and the ongoing process of South American social and economic integration.

Salvador’s Pestana Hotel hosted one of the main topics on the agenda, the construction of an international oil refinery in the state of Pernambuco: the Abreu e Lima Refinery. However, both parties were unable to reach an agreement about building it for undisclosed reasons and the decision was pushed back another 90 days.

Chávez showed his discomfort with the lack of a decision, saying, “I confess my disappointment, but I think it’s both countries fault (not) to reach a beneficial agreement for everyone involved”. Problems with investment and unsettled oil prices stand as the most likely reasons for the lack of a concrete deal as the ongoing world economic slump continues to hit funding for such projects.

Regarding oil prices and its commercialization, Chávez stated that he cannot grant privileges to Brazil’s Petrobras, the state-owned energy company. “We are unable to offer special prices. They must be market-based, then it works all over the world, be it in Cuba, Russia or the United States”.

Venezuela’s oil-based economy has had some tough months recently due to the global economic slowdown which has had a major impact in the country’s exporting revenue. According to Venezuelan authorities, oil revenues have been cut by half during 2009.

On a lighter note, Lula talked about the “possibility” of becoming the head of Petrobras. ‘If minister Dilma Roussef is elected the next president of Brazil, I could be Petrobras’ president and José Sérgio Gabrielli (currently in charge) could be my head adviser”, he joked.

Of further interest in the meeting was Hugo Chavez’ formal request to Lula for an increased line of credit through the Banco Nacional de Desenvolvimento Econômico e Social (BNDES) for investment in the Caracas Subway System. According to Chávez’ advisers, there are negotiations well underway with BNDES in the amount of US$732 million dollars towards its construction which is to be handled by the Brazilian company Odebrecht, one of the largest of its kind operating in Venezuela.

Accompanied by political advisers and ministries, the South American leaders also reviewed an agenda that included discussion about Venezuela’s formal entry as a member state of Mercosur, a regional trade organization that currently includes Brazil, Uruguay, Argentina and Paraguay as full members.

One of the main blocks in Venezuela’s path to becoming a Mercosur country is the approval of the Brazilian Senate, which has asked for more information about the membership submission and further details about how Caracas intends to adapt to Mercosur trading policies.

In a position of sheer disagreement with a possible membership granted to Venezuela in Mercosur, Caracas’ own mayor and Chávez’ opposition leader Antonio Ledezma stated in a letter addressed to the senate that accepting Venezuela would establish a very bad precedent. “Chávez’ actions show an authoritarian man who does not believe in free market principles. Not only that, he called members of the Brazilian Senate ‘Parrots of the American Empire’”.

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